The central bank warned that crumbling confidence in the economy posed a “material risk to U.K. financial stability,” while the International Monetary Fund took the rare step to urge a member of the Group of Seven advanced economies to abandon its plan to cut taxes and increase borrowing to cover the cost.

The Bank of England said it would buy long-term government bonds over the next two weeks to combat a recent slide in British financial assets. The bank’s actions are focused on long-term government debt, where yields have soared in recent days, pushing up government borrowing costs.

“Were dysfunction in this market to continue or worsen, there would be a material risk to U.K. financial stability,″ the bank said in a statement. “This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.″

The move came five days after Prime Minister Liz Truss’ new government sparked investor concern when it unveiled an economic stimulus program that included 45 billion pounds ($48 billion) of tax cuts and no spending reductions. It also wants to spend billions to help shield homes and businesses from soaring energy price s, sparking fears of spiraling government debt and higher inflation, which is already running at a nearly 40-year high of 9.9%.

Continue reading HERE

Source: https://apnews.com/article/inflation-economic-growth-international-monetary-fund-b6346608fbee3742ed95275136092b03

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IMF chief Kristalina Georgieva and World Bank President David Malpass said the war was driving commodity prices higher, which risked further fueling inflation, and disruptions in financial markets would continue to worsen should the conflict persist. Sanctions imposed by the United States, Europe and other allies would also have a significant economic impact.

The leaders said they were deeply shocked and saddened by the war, but did not explicitly mention Russia, which is a shareholder in both institutions. Russia began a full-scale invasion of Ukraine on Feb. 24 and its armed forces are bombarding Ukrainian urban areas. read more
https://www.reuters.com/world/europe/russian-isolation-intensifies-ukraine-fighting-rages-2022-03-01/

“People are being killed, injured, and forced to flee, and massive damage is caused to the country’s physical infrastructure,” Georgieva and Malpass said in a joint statement. “We stand with the Ukrainian people through these horrifying developments. The war is also creating significant spillovers to other countries.”

The IMF and the World Bank were urgently increasing financing and policy support for Ukraine, and had been in daily contact with the authorities on crisis measures, they said.

The IMF board could consider Ukraine’s request for emergency financing through the Rapid Financing Instrument as early as next week, they said. An additional $2.2 billion was available before the end of June under its stand-by arrangement.

The World Bank is also preparing a $3 billion package of support in the coming months, they said. That funding would start with a fast-disbursing budget injection of at least $350 million that the bank’s board will consider this week, followed by $200 million for health and education programs.

Reuters first reported the $350 million loan earlier on Tuesday. read more
https://www.reuters.com/markets/europe/exclusive-world-bank-pushes-350-mln-ukraine-loan-approval-within-days-sources-2022-03-01/

The two institutions said they were also assessing the economic and financial impact of the war and refugees on other countries in the region and the world. They said they stood ready to provide enhanced policy, technical, and financial support to Ukraine’s neighbors as needed. More than 660,000 people have fled Ukraine to countries such as Poland, Romania and Hungary since the invasion began, the U.N. refugee agency said.

“Coordinated international action will be crucial to mitigate risks and navigate the treacherous period ahead,” the institutions said.

Reporting by Andrea Shalal and David Lawder; Editing by Grant McCool

Our Standards: The Thomson Reuters Trust Principles.

Source: https://www.reuters.com/markets/europe/world-bank-imf-racing-get-aid-ukraine-coming-weeks-months-2022-03-01/

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A $50-billion plan to end the COVID-19 pandemic developed by the International Monetary Fund (IMF), would generate an additional $9 trillion in global economic returns by 2025, said IMF Managing Director Kristalina Georgieva on Tuesday.

The plan is supported by the World Bank Group, World Health Organization (WHO), and the World Trade Organization (WTO), and their leaders joined Georgieva at a media briefing convened by the WHO.

The first element of the IMF’s three-point plan involves vaccinating “at least 40% of the population in all countries by end 2021 and at least 60% by the first half of 2022”, Georgieva told the briefing.

“This requires additional upfront grants to COVAX, donating surplus doses and free cross-border flows of raw materials and finished vaccines,” she said.

“Second, insuring against downside risks, such as new variants,” said Georgieva. “This would involve investing in additional vaccine production capacity by 1 billion doses, diversifying production and scaling up surveillance, and contingency plans to handle virus mutations or supply shocks.”

The third element involves managing the “interim period” in countries with limited vaccine supply through the tried-and-tested public health measures including masks, widespread testing, and contact tracing.

“Vaccine policy is economic policy,” Georgieva stressed, referring to the growing divergence between countries with rapid vaccinations that are coming out of the pandemic crisis fast, and those with low vaccination rates, that are falling further behind.

“That is dangerous for everyone because it holds the global recovery back, and we are creating a breeding ground for mutations,” she added.

World Bank Offers Vaccine Finance

World Bank President David Malpass

Counting the $22 billion recently pledged by G20 member to the Access to COVID-19 Tools (ACT) Accelerator that manages COVAX, Georgieva said that an additional $13 billion could come from grant finance and $15 billion from national governments, supported by “concessional financing” from the World Bank and other development banks.

World Bank President David Malpass told the briefing that the bank has $12 billion in vaccine financing available to help countries buy and distribute COVID-19 vaccines, and encourage vaccinations.

“By the end of June, we will have approved vaccination operations in over 50 countries. These countries can immediately use vaccines from COVAX, from manufacturers, and from donor countries themselves as soon as they are made available,” said Malgass.

WTO Director-General Dr. Ngozi Okonjo-Iweala

WTO Director-General Dr. Ngozi Okonjo-Iweala stressed that trade policy can help with vaccine scale-up by freeing supply chains for raw materials and finished vaccines, and working with manufacturers to maximize existing production facilities, and building new manufacturing capacity.

“We know that there’s the TRIPS waiver debate going on at the WTO and while I cannot take sides, we need to get to a conclusion on this debate, promote technology transfer and know-how to get lasting increases in production capacity,” said Okonjo-Iweala.

WHO Director-General Tedros Adhanom Ghebreyesus said that the leaders’ calls for the $50 billion rapid investment would “fund the equitable distribution of vaccines and other crucial health tools”, and the “majority of the new funding would be made available quickly through grants, including to fill the ACT Accelerator funding gap”.

The IMF, WBG, WHO, and WTO leaders issued their joint statement as a round of G7 meetings were set to start, beginning with a meeting of finance ministers later this week.

Tedros Welcomes Sinovac Approval

Tedros also welcomed the WHO decision on Tuesday to grant emergency use listing (EUL) to the Chinese COVID-19 vaccine, Sinovac (also called CoronaVac) – the eighth vaccine to get this listing, a prerequisite for it to be used by COVAX.

The vaccine was “found to be safe, effective, and quality assured following two doses”, said Tedros, adding that it’s easy storage requirements “make it very suitable for low resource settings”.

“Vaccine efficacy results showed that the vaccine prevented symptomatic disease in 51% of those vaccinated and prevented severe COVID-19 and hospitalization in 100% of the studied population,” according to a WHO statement based on the recommendation of its Strategic Advisory Group of Experts on Immunization (SAGE)

“Few older adults (over 60 years) were enrolled in clinical trials, so efficacy could not be estimated in this age group,” said the WHO.

However, it is not recommending an upper age limit for the vaccine “because data collected during subsequent use in multiple countries and supportive immunogenicity data suggest the vaccine is likely to have a protective effect in older persons,” said the global body.

Source: https://healthpolicy-watch.news/global-leaders-call-for-50-billion-investment/

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Citing a “30-year race to the bottom” in which countries have slashed corporate tax rates in an effort to attract multinational businesses, Yellen said the Biden administration would work with other advanced economies in the Group of 20 to set a minimum.

“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” Yellen said in a virtual speech to the Chicago Council on Global Affairs. “It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods.”

The speech was Yellen’s highest-profile so far on international affairs and came just as the spring meetings of the World Bank and International Monetary Fund began in a virtual format.

“It is important to work with other countries to end the pressures of tax competition and corporate tax base erosion,” Yellen said.

President Joe Biden has proposed hiking the U.S. corporate tax rate to 28% from 21%, partially undoing the Trump administration’s cut from 35% in its 2017 tax legislation. Biden also wants to set a minimum U.S. tax on overseas corporate income and to make it harder for companies to shift earnings offshore. The increase would help pay for the White House’s ambitious $2.3 trillion infrastructure proposal.

Yellen’s remarks essentially serve as an endorsement of negotiations that have been underway at the 37-nation Organization for Economic Cooperation and Development for roughly two years, said Alan Auerbach, an economist at the University of California at Berkeley.

Biden’s U.S. corporate tax proposal includes an increase to the U.S. minimum tax that was included in Trump’s tax law, from 10.5% to 21%. One focus of the OECD talks is whether other countries will adopt similar minimums. Biden’s corporate tax measure would also penalize other countries without a minimum corporate tax by more heavily taxing their subsidiaries in the U.S.

Auerbach said that the OECD has helped foster other agreements around issues such as bank secrecy.

“There is precedent for this sort of thing,” Auerbach said. “But this would be a big deal because it would get countries to coordinate their tax systems in ways they haven’t before.”

Also on Monday, Biden said he is “not at all” concerned that a higher corporate tax rate would cause some U.S. companies to relocate overseas, though Yellen’s proposed global minimum corporate tax is intended to prevent that from happening.

“There’s no evidence to that … that’s bizarre,” Biden said in response to a question from reporters.

According to the Tax Foundation, a right-leaning think tank, the Trump administration’s corporate tax reduction lowered the U.S. rate from the highest among the OECD countries to the 13th highest. Many analysts have argued, however, that few large U.S. multinationals paid the full tax.

“We have 51 or 52 corporations from the Fortune 500 who haven’t paid a single penny a day for three years?” Biden said. “Come on.”

Sen. Pat Toomey, R-Penn., said that Yellen’s proposal was unlikely to make much progress overseas. He also said Republicans should reverse any corporate tax hike if they regain a congressional majority in upcoming elections.

“Spoiler alert: This effort will likely fail and even if there is some sort of agreement, it will be non-binding because it is not a treaty,” Toomey said.

Yellen, meanwhile, downplayed the potential for the Biden administration’s domestic agenda, which also includes a $1.9 trillion COVID relief package approved last month, to spur higher inflation. Former Treasury Secretary Larry Summers, among others, has raised such concerns since the relief bill passed.

“I strongly doubt that it’s going to cause inflationary pressures,” Yellen said, referring to the administration’s infrastructure proposal. “The problem for a very long time has been inflation that’s too low, not inflation that’s too high.”

Yellen also said the United States will step up its efforts at home and overseas to fight climate change, “after sitting on the sidelines for four years.”

Treasury will work to “promote the flow of capital toward climate-aligned investments and away from carbon-intensive investments,” Yellen said. That approach has raised the ire of GOP members of Congress, who say it threatens the ability of the U.S. oil and gas industry to access needed lending.

Yellen also noted that many developing nations are lagging in vaccinating their populations, and have also experienced harsh economic consequences from the pandemic. As many as 150 million people worldwide will fall into extreme poverty this year, Yellen said.

“The result will likely be a deeper and longer-lasting crisis, with mounting problems of indebtedness, more entrenched poverty, and growing inequality,” Yellen said.

The Biden administration supports the creation of $650 billion in new lending capacity at the IMF to address such issues, she said. Many Republicans in Congress oppose the new allotment, arguing that much of the funding would flow to relatively better-off developing countries, such as China.

Yellen acknowledged that the additional credit would be distributed to each IMF member, but argued that “significant resources will go to the poorest countries most in need.” Nations can also donate some of their funds to the hardest-hit countries, which she expects many will do, she added.

Source: https://apnews.com/article/janet-yellen-minimum-global-corporate-income-tax-0a839a4705566a8b9f8bd5411bfe62d5

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The letter was sent to the Spring 2021 virtual meeting (April 5-11) between the globalist World Bank and International Monetary Fund (IMF) and delivered through Peter Cardinal Turkson, Prefect of the Holy See’s Dicastery for Promoting Integral Human Development.

In the letter, the Pope says the Covid-19 pandemic forced the world to “confront a series of grave and interrelated socio-economic, ecological, and political crises.” Francis brought up one of his favorite topics, climate change, claiming, “We are, in fact, in debt to nature itself, as well as the people and countries affected by human-induced ecological degradation and biodiversity loss.”

Francis’s language sounds similar to that of the globalist founder of the World Economic Forum (WEF), Klaus Schwab, who designed the anti-Catholic “Great Reset,” a plan heavily dependent on a “green financial agenda.” Francis has sent addresses to WEF already four times during his eight years as pope and has permitted a Vatican roundtable at WEF’s annual Swiss conference site, Davos.

Pope Francis also refers to the secular fraternity outlined in his recent encyclical Fratelli Tutti, and calls for “a justly financed vaccine solidarity,” which, according to him, is necessary to fulfill “the law of love and the health of all.”

“Here,” he continues, “I reiterate my call to government leaders, businesses and international organizations to work together in providing vaccines for all, especially for the most vulnerable and needy.”

Pope Francis recently called for a “new world order” and, according to the letter, this world order should be globalist, as he says, “There remains an urgent need for a global plan that can create new or regenerate existing institutions, particularly those of global governance, and help to build a new network of international relations for advancing the integral human development of all peoples.”

Jesus Christ and the Catholic Church are not mentioned at all in the letter, while God is mentioned only once—in the letter’s last line.

Source: https://thenationalpulse.com/breaking/pope-francis-calls-for-global-governance-and-vaccines-for-all/

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A pedestrian wearing a protective face mask amid the the coronavirus (COVID-19) outbreak is reflected on a screen displaying stock prices outside a brokerage in Tokyo, Japan, on March 17, 2020. Issei Kato/Reuters

The coronavirus is throttling the global economy. In a matter of weeks, the highly contagious disease has pushed the world to the brink of a recession more severe than the 2008 financial crisis. The depth and duration of the downturn will depend on many factors, including the behavior of the virus itself, public health responses, and economic interventions.

Given the extraordinary nature of the pandemic-induced crisis, fiscal and monetary policymakers are working without a playbook. Many, however, are moving forward with stunning bailouts that could collectively top $10 trillion.

How bad will the recession be?

Readings in April suggested the global economy was sailing into a colossal storm. “We anticipate the worst economic fallout since the Great Depression,” said Kristalina Georgieva, managing director of the International Monetary Fund (IMF). Meanwhile, the Organization for Economic Cooperation and Development said its indicators produced the strongest warning on record that most major economies had entered a “sharp slowdown.” The World Trade Organization, for its part, forecast that nearly all regions of the world would suffer double-digit declines in trade this year, with North American and Asian exporters hit hardest.

Many governments have effectively frozen social and economic activity in all or parts of their countries to contain the outbreak, shuttering nonessential businesses and ordering residents to stay at home for weeks or months. Billions of people worldwide remain under some type of lockdown. Major industries, especially airlines and other travel-related sectors, are on the brink of bankruptcy. The hope is that economies can power down without causing extreme disruptions, such as widespread business failures or joblessness, and then quickly get back up to speed after the pandemic abates.

Just how quickly governments should unshackle their economies is a matter of debate. Some governments in Asia and Europe that feel they’ve contained the virus have begun to slowly reopen their economies. Similarly, more than a dozen U.S. states are loosening restrictions, and President Trump did not renew federal social-distancing guidelines, which expired on April 30. But new outbreaks have already caused some countries to reimpose restraints.

For now, some economists hope for a strong global rebound in the third quarter, mirroring the recoveries in Asia after the Severe Acute Respiratory Syndrome (SARS) outbreak of 2003. However, others warn that the pandemic could be far more economically destructive than any past outbreak, and caution that a recovery could take much longer.

In the meantime, many world powers are moving mountains to prop up their economies during the coronavirus downturn.

China

The world’s second-largest economy was stirring back to life in April after suffering a withering blow from the coronavirus, which originated in the city of Wuhan in Hubei Province in late 2019. Several weeks of government-imposed lockdowns on dozens of cities led to steep declines in factory output, retail sales, construction, and other economic activity. Overall, gross domestic product (GDP) dipped almost 7 percent in the first quarter, China’s first economic contraction in more than forty years.

China’s leadership seems less inclined to spearhead a global economic recovery this time than it did following the 2008 financial crisis, when it spent liberally on a stimulus package of more than a half trillion dollars. In the years since, China has roughly doubled its government debt—to about 60 percent of gross domestic product (GDP)—and many analysts think it cannot afford to spend so aggressively again.

So far, China’s central bank has taken relatively modest actions, reducing reserve requirements for banks, which will allow them to loan an additional $80 billion to struggling businesses, and indicating that it will cut interest rates in the months ahead. “The normal monetary policy should be kept as long as possible,” wrote central bank chief Yi Gang in late April. “The impact of the pandemic is temporary. China’s economy has strong resilience and great potential, while the fundamentals for high-quality development won’t change.”

Analysts say a major sign to watch will be Beijing’s announcement of its annual growth target, which was postponed from March to May because of the virus. An ambitious goal of around 6 percent could signal that a hefty stimulus package is coming, while a more modest number, closer to 3 percent, would likely mean a continuation of the status quo. There is also a possibility that China may forgo setting a target for this year. To hit its long-held goal of doubling GDP between 2010 and 2020, China would have to grow at least 5.6 percent this year, a pace few economists think is possible.

Germany

The German economy is expected to shrink for the first time since 2009, anywhere from 3 to 10 percent this year. The government itself forecasted a contraction of just over 6 percent, which would be the economy’s worst performance in decades. In March, nearly a half million German companies applied to have their employees join a short-term government work program intended to prevent mass layoffs.

To counter the economic fallout from the coronavirus, Berlin is taking bold actions, abandoning its steadfast commitment to balanced budgets, known as schwarze Null or “black zero.” It is allocating at least 350 billion euros—or about 10 percent of its GDP—to prop up the eurozone’s largest economy. Funds will be spent to bail out struggling businesses, including by making unlimited loans and potentially taking equity stakes.

“We’re doing whatever is necessary,” said Chancellor Angela Merkel, who also led the country through the 2008 crisis. “And we won’t be asking every day what it means for our deficit.” Officials note that Germany is poised to spend aggressively because the government has kept its finances in check in recent years, reducing its debt-to-GDP ratio from more than 80 percent in 2010 to below 60 percent today.

After moving swiftly to control the outbreak within its borders, Germany announced in mid-April that it would slowly reopen its economy. However, Merkel cautioned state leaders—Germany has a federal system—to lift restrictions with great care.

Japan

Economists predict that Japan’s export-driven economy will shrink by around 3 percent this year, which would be its worst performance since 2008. The deep impact from the pandemic comes on the heels of an economic slowdown from a sales tax hike last fall. The virus has also forced the government to postpone the Summer Olympics until next year.

Like some of its peers in the West, the Japanese government has responded with a massive relief package, worth nearly $1 trillion, to help the country through one of its most challenging periods in recent memory. The headline figure is equal to about 20 percent of Japan’s GDP, but analysts say the actual spending impact will be much smaller.

“It is no exaggeration to say that Japan’s economy, and the world economy, is facing the biggest crisis since [World War II] right now. We will protect employment and life at all costs,” said Prime Minister Shinzo Abe. Bailout measures include cash payments to citizens and small and midsize businesses, interest-free loans, delayed tax payments, and travel and tourism coupons.

Japan’s central bank announced in late April that it was prepared to buy an unlimited amount of government debt and to double its purchases of corporate debt. However, some critics say the Bank of Japan has limited options after having kept interest rates next to zero for years.

United Kingdom

The pandemic is paralyzing the British economy just as its leaders are negotiating a post-Brexit relationship with the European Union. Prior to the outbreak, there were already concerns about a recession from a so-called hard Brexit. Economists say that the coronavirus pandemic could take a 5 to 10 percent slice out of the economy in 2020.

The government is prepared to make interventions that would be “unprecedented in the history of the British state” to support the economy, finance minister Rishi Sunak said in early March. Among its emergency measures, the Treasury has pledged to pay 80 percent of workers’ salaries for several months to keep companies from resorting to huge layoffs; offered to reimburse self-employed workers for lost wages; deferred tax payments; increased unemployment benefits; established a loan program for small and midsize companies; and provided rescue aid to charities.

The Bank of England has dropped its benchmark interest rate to 0.5 percent, a record low, and loosened capital requirements for banks. In an extraordinary move in early April, the central bank agreed to directly finance the government’s spending during the crisis, freeing it from having to issue debt in the bond market. All told, the rescue efforts could see Britain spend upward of 400 billion pounds, or about 15 percent of GDP.

United States

In a sign of the staggering toll the virus was taking on the U.S. economy, more than thirty million Americans—about one in six U.S. workers—have filed for unemployment since mid-March. Before this crisis, the highest number of filings in a single week was 695,000, in 1982. Economic output plunged by nearly 5 percent in the first three months of 2020, the steepest dive since 2008. Most analysts expect the damage to be far worse in the second quarter, with some suggesting that the unemployment rate could reach as high as 40 percent, significantly higher than its peak of 25 percent during the Great Depression.

While Washington has been criticized for mismanaging the public health response to the pandemic, it’s also been credited with moving decisively to stabilize financial markets. In March, the Federal Reserve indicated that it will do anything within its power to support the economy and provide liquidity. Among the Fed’s historic actions have been: cutting interest rates close to zero, reducing bank reserve requirements to zero, rapidly purchasing nearly $2 trillion in Treasury bonds and mortgage-backed securities, buying corporate and municipal debt, and extending emergency credit to nonbanks.

Meanwhile, on the fiscal side, lawmakers passed a $2 trillion stimulus package in March that some analysts have characterized as a bridge loan to get the U.S. economy through the crisis. It includes direct payments of up to $1200 to individuals, hundreds of billions of dollars in loans and grants to businesses, increases to unemployment benefits, and support for hospitals and health-care providers. “In effect, this is a wartime level of investment into our nation,” said Senate Majority Leader Mitch McConnell. A month later, Congress signed off on a second bailout package, this one totaling close to a half billion dollars and aimed at providing relief to small businesses and more aid to hospitals.

Multilateral Institutions

European Union. Eurozone finance ministers agreed to a 500-billion-euro package to provide emergency lending and other assistance to member countries, businesses, and workers. Christine Lagarde, president of the European Central Bank (ECB), has promised there will be “no limits” on the ECB’s defense of the eurozone. The bank is set to buy up to 750 billion euros in additional bonds this year to help its members amid the downturn.

International Monetary Fund. The IMF has set aside $100 billion to lend to member countries that are facing acute financial crises because of the coronavirus, with preference given to emerging economies. By early April, more than ninety countries had requested bailouts.

World Bank Group. President David Malpass said the bank was committing more than $150 billion to counter the pandemic’s effects. More than two dozen virus-related loan requests have been fast-tracked, with many more in the pipeline. Thus far, India has received the largest loan at $1 billion.

Source: https://www.cfr.org/backgrounder/coronavirus-how-are-countries-responding-economic-crisis

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Moreno has announced that he’s introducing a curfew and the “militarization” of Quito, starting at 8 pm GMT on Saturday. “This will facilitate the use of public force in the face of intolerable excess of violence,” he said on Twitter. Ecuador’s armed forces also announced late on Saturday that movement around the country would be restricted for 24 hours.

Due to “the complexity of the situation,” Moreno will take another look at Decree 883, which has enraged citizens, Quito Mayor Jorge Yunda Machado announced on Twitter.

The move was one of the austerity measures introduced by the government in order to meet the conditions of a $4.2 billion loan deal with the International Monetary Fund (IMF). Moreno later said that he would assess the impact of the cuts, but didn’t indicate whether he was planning to repeal it.

The president also offered to begin talks with protest leaders to settle the crisis, and they have accepted his invitation.

One of the conditions was that the talks be held in public and be broadcast live. “We’re not going to talk behind closed doors. It has to be with the Ecuadorian people,” one of the protest leaders said.

©  Reuters / Carlos Garcia Rawlins

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Footage from Quito on Saturday resembled a war zone, with barricades, fires, and plumes of tear gas fired by the police at the raging crowds.

©  Reuters / Ivan Alvarado

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Live feed by RT’s video agency Ruptly showed thick smoke in the air and crowds of people rioting, as sounds of explosions rocked the streets.

The protesters, mainly represented by Ecuador’s indigenous people, set the Comptroller General’s Office on fire and ravaged the parliament building, breaking windows and throwing furniture into the street. The demonstrators also blocked all roads leading to Quito International Airport.

©  Reuters / Carlos Garcia Rawlins

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The administrative buildings taken over by the protesters were empty, as Moreno had already moved the government to the city of Guayaquil, located 250km southwest of Quito.

©  Reuters / Henry Romero

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It was the capital’s 10th straight day of unrest, which broke out after the government announced austerity measures. The suspension of fuel subsidies saw the price of gasoline spike from $1.85 to $2.39 per gallon, while diesel prices went up by a staggering 123 percent – from $1.03 to $2.29.

©  Reuters / Ivan Alvarado

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Five people have been killed and over 1,000 wounded in clashes since October 3, according to government data. The police have arrested over 1,100 demonstrators.

©  Reuters / Carlos Garcia Rawlins

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Moreno was previously reluctant to reconsider the harsh measures, and blamed former president, Rafael Correa, and his Venezuelan ally Nicolas Maduro, of masterminding the demonstrations.

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Source: https://www.rt.com/news/470809-protesters-riot-quito-moreno-agrees/

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View of damages in a supermarket in Valencia, Carabobo State, on May 5, 2017, the day after anti-government protesters looted stores, set fire to cars and clashed with police, leaving at least five people injured and one dead. Ronaldo Schemidt | AFP | Getty Images

Wasted oil riches

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But how prepared is it for the next financial crisis? What more needs to be done?

The region has become much stronger through the increased integration of trade and investment compared with the situation before the 1997 Asian financial crisis. The ASEAN+3 region now accounts for more than a quarter of world GDP and 30 per cent of global trade. But the expansion in international trade and the increasing complexities in financial networks and other activities are increasing the risks of volatile capital inflows and outflows. Mitigating these risks warrants concerted efforts at the national, regional and global levels.

Many risks remain in the short-term, notably the threat of protectionism, tightening global financial conditions and tail risks of geopolitical events. Amid these immediate concerns, the region needs to watch the global, structural forces that affect its economies, especially in the financial sector.

As global trends such as digitalisation, changes in global supply chains and the use of new technology transform the nature of cross-border economic and financial transactions and spillovers, the changed conditions demand not only national but a regional-wide response, desirably in a harmonised manner. The demands and expectations placed on the speed of policy reaction and the clarity of policy communication are rising. Take, for example, capital flows to emerging markets in the region. With technology facilitating lightning-speed trading, sudden shocks in capital flows driven by herd behaviour are risks that policymakers have to grapple with.

Although the International Monetary Fund (IMF), at the centre of the international monetary system, is the best-known firefighter to help governments that find themselves in trouble during a crisis, it is no longer the only one. Nowadays a large part of the world, but not all, is also covered by regional financing arrangements that can mobilise financial resources for countries facing temporary liquidity problems during a crisis. One such arrangement is the Chiang Mai Initiative Multilateralisation (CMIM) that evolved from a system of currency swaps among economies in East Asia after the 1997 Asian financial crisis, with the ASEAN+3 Macroeconomic Research Office (AMRO) as its surveillance arm.

Regional financing arrangements (RFAs) are considered to be a key component of the global financial safety net, the other components of which are foreign reserves, bilateral swap lines between central banks, and the IMF. In an increasingly integrated world, global and regional financial arrangements are being enhanced and must improve cooperation with one another to form a comprehensive and effective safety net against financial crises and contagion.

At the global level, the IMF is reviewing its facilities periodically to ensure that they are adequate to meet the financing needs of its members in light of developments in the global economy and financial markets.

With regional financing arrangements there have been continuous efforts to strengthen their own internal mechanisms, as well as at collaboration among RFAs and between RFAs and other layers of the global financial safety net. Although challenges remain in anticipation of any possible crises in the future, the strong upswing of the global economy is an opportune time to undertake a more comprehensive review and reform of these regional arrangements.

In East Asia, AMRO, in its support function of the CMIM, has supported its member authorities over the past three years to undertake joint test runs with the IMF to enhance the operational readiness of CMIM facilities. Recognising the importance of cooperation among different layers of the global financial safety net, AMRO has strengthened relationships with various partners to draw on the expertise and knowledge of each institution.

Building a robust regional safety net is a long-term project. In the changing regional and global economy, there are several aspects that need to be enhanced to boost regional financing arrangements’ contribution to the global safety net.

The first is enhancing coordination among multiple layers of the global financial safety net. This is the prerequisite to provide timely and efficient support for countries that are in need of financing to support their external position. Countries should be able to combine the use of different tools to generate synergies in terms of timing and size of intervention, sequencing and conditionality design.

Second, we need to strengthen regional economic integration and the role of regional financing arrangements. With rising protectionist risks in major economies as well as changes in production networks, there is a need to strengthen intra-regional connectivity and integration in many areas to meet growing intra-regional demand and improve the region’s resilience against external shocks.

Third, it is important for regional financing arrangements, in addition to its role to provide short-term liquidity support, to upgrade its function to provide  policy recommendations for their members to achieve macroeconomic and financial stability, in particular, during crisis time. The specific aspects of the beneficiary country and strong sense of the ownership of its government is important in implementing such policy recommendations. Those will be the key when the recommended policies will be adopted by the country. Those consideration will enhance the positive impact on the economy when it is well in place in the domestic policies and legal structures.

Besides enhancing the regional financial safety net, and the build-up of foreign reserves by individual economies, authorities are looking at using local currencies to invoice trade. At present regional trade is heavily reliant on the use of the US dollar, even though intra-regional trade has grown substantially.Increasing regional currency use will help reduce exchange rate risks vis-a-vis the US dollar. It will also help to reduce the amount of foreign reserves in US dollars needed as a liquidity buffer for trade purposes. About US$6.2 trillion of the world’s US$12.7 trillion worth of US dollar foreign reserves is held by the authorities in our region.

In the highly interconnected global economy and financial markets, financial crises are bound to recur every now and then, although it cannot be predicted when and where. That is why the region must prepare for the coming crisis now.

Yasuto Watanabe is Deputy-Director of the ASEAN+3 Macroeconomic Research Office. The views expressed here are his own, not those of AMRO or its member authorities. Neither AMRO nor its member authorities shall be held responsible for any consequence of the use of the information contained herein.

This article appeared in the most recent edition of East Asia Forum Quarterly, ‘Asian crisis, ready or not’.

Source: http://www.eastasiaforum.org/2018/11/14/preparing-asia-for-the-next-financial-crisis/

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Members of the Jordanian gendarmerie and security forces stand on alert as protesters shout slogans and raise a national flag during a demonstration outside the Prime Minister’s office in the capital Amman late on June 2, 2018  Khalil MAZRAAWI (AFP)

Angry protests rocked cities across Jordan overnight against IMF-backed austerity measures including a new income tax draft law and price hikes, hours after the government and unions failed to reach an agreement to end the standoff.

Around 3,000 people faced down a heavy security presence to gather near the prime minister’s office in central Amman until the early hours of Saturday morning, waving Jordanian flags and signs reading “we will not kneel”.

Protests have gripped the country since Wednesday, when hundreds flooded the streets of Amman and demonstrated in other cities to demand the fall of the government.

Last week the government proposed an income tax draft law, yet to be approved by parliament, aimed at increasing taxes on employees by at least 5 percent and on companies by between 20 and 40 percent.

It is the latest in a series of economic reforms and repeated price hikes on basic goods since Amman secured a $723-million three-year credit line from the International Monetary Fund in 2016.

Jordanian protesters shout slogans and raise a national flag during a demonstration outside the Prime Minister’s office in the capital Amman late on June 2, 2018   Khalil MAZRAAWI (AFP)

The post Jordan protests snowball over IMF-backed austerity first appeared on Garner Ted Armstrong Evangelistic Association.